Author: Tom-Chris Emewulu
Digital Evangelist

Clothing brands have a special place in our modern society, but the high rate of fashion chargeback is taking the joy out of the "wonder hobby."

A clothing brand is often like a ticket into pop and glamor.

And if you ask people like Anna Wintour, she’ll tell you that it’s like having a piece of the action in a James Bond movie.

Clothing brands have a special place in our modern society because fashion is a gateway for folks to make a statement with what they are wearing. It doesn’t matter whether you sell shoes, high-ticket apparel, or custom t-shirts. The economics of the art makes sense for online sellers too. Statista says the eCommerce fashion industry’s compound annual growth rate (CAGR) could reach 14.2% by 2025, with the sector netting a $672.71 billion valuation by 2023.

Unfortunately, the high rate of fashion chargebacks is taking the joy out of the "wonder hobby." One study found that 38 percent of fashion retailers saw an increase in friendly fraud in recent years, as fraudsters now use friendly fraud to get freebies.

What should you do to secure your revenue from liar-buyers?

We’ve teamed up with apparel experts from Apliiq, to help clothing brands understand how fraud can happen and what they can do to fight back.

Fashion Chargeback: Understanding the Difference Between Credit Card Disputes and Inventory Chargebacks

It’s crucial to highlight that chargeback in the fashion industry speaks to two realities.

In traditional mass production, supplier chargebacks happen when a retailer receives unsatisfactory and unsaleable goods from a wholesaler. For example, if the inventory was damaged in transit, the production was of a poor standard, or the universal product code (UPC) for labeling the stock was wrong, the retailer might seek remediation with a chargeback.

In many cases, these situations can be avoided altogether, by using more modern techniques of product creation, like printing your clothing on demand. When you utilize on-demand production techniques, it’s typically far easier to work with your supplier to get any issues rectified and chargebacks shouldn’t be an issue, since every consumer order is fulfilled individually.

Clothing brands should also place sample orders to ensure their manufacturer of choice understands the requirements for your products and can fulfill your orders as you desire.

However, the most common types of fraud and chargebacks your eCommerce business will face are chargebacks between you and your customers or fraudsters. If you are new to eCommerce, it may boggle your mind how these types of disputes arise, so read on to see how they arise and what you can do to fight back.

win chargebacks on autopilot with chargeflow

Why Scammers Target Clothing Brands

For starters, eCommerce fashion retailers often handle high transaction volumes. Such traffic makes it easy for fraudsters to hide in plain sight. Fashion retailers become distracted by their high business demands and customers, and they don’t get to scrutinize order anomalies as adequately as a lower-volume merchant would.

Another reason fraudsters see eCommerce fashion retailers as an easy target is that clothing brands often carry a high resale value. Hence, scammers who need a way to quickly convert their stolen credit card numbers into real money target such transactions.

Again, many clothing brands have flexible order return policies because buyers usually test clothing at home to ensure it fits or meets their expectations. Unfortunately, scammers use such generosity for wardrobing and return and refund fraud. They can buy the inventory, wear it to their desired occasion, and then send it back for a full refund for some confabulated reason.

If the seller senses they’re getting played and denies such a request, the scammer could file a chargeback with their bank.

In other instances, the online shoplifter will swap return shipping labels to create tracking information as though they returned the order to the seller. They trick the seller into issuing a refund, but the fictitious return remains in limbo while they walk away with cash and merchandise. That’s why brands like Apliiq help customers get their products right the first time – to ensure no need for a return.

How Clothing Brands Can Fight Chargebacks

To understand the most effective fashion chargeback mitigation approach, you must know the various credit card chargebacks that fashion brands face.

  1. True fraud chargebacks

The fraudster uses stolen card information for genuine fraud chargebacks to make an unauthorized transaction. When the actual owner of the card finds out about the bill, they file a chargeback.

In this instance, your chances of winning the fight are zero. Deploy the requisite security tech stack to prevent such transactions from going through in the first place. But if you onboard Chargeflow’s chargeback automation, you have comprehensive order insight to monitor your buyers' order history and track anomalies effectively.

  1. Merchant error

It’s true that most chargebacks, up to 70% to be precise, result from friendly fraud, a revenue drainage mechanism where a cardholder makes a transaction and comes back to dispute the bill after receiving their order. Yet, some chargebacks can also be your fault – some clerical and order management errors you can avoid.

For instance, it could be that your team shipped something other than what the buyer paid for or billed them twice for the same transaction. These chargebacks are relatively subjective. And if you figure the buyer has a valid case, you can refund them or offer some other commensurate compensation. However, you should do your best to prevent these errors from happening and educate your staff on the best practices.

  1. Friendly fraud chargebacks

Friendly fraud can often be a by-product of legitimate confusion or poor communication. But we know, from what merchants have reported, most friendly frauds are baseless disputes clothed with false claims from cardholders to get free goods and extra cash.

Here are some stats to illustrate the severity of friendly fraud:

  • Analysts at Nasdaq say that payment card fraud losses, predominantly friendly fraud, spiked above $32 billion worldwide in 2021, and the cost of card fraud climbed to an all-time high of 7.1 cents for every $100 in order volume.
  • 46% of 2000 respondents in a Forter survey said friendly fraud should be an illegal offense, and 24% said they disputed a charge despite receiving the item.
  • $1 in $10 earned from eCommerce is spent managing fraud.
  • About 9 in 10 merchants lost revenue due to payment fraud in 2020, and 55% reported increased chargeback levels.
  • Estimates show that for every $1 of such chargeback a retailer gets, they lose at least $3.
Cost of fraud keeps rising

Chargeback is not a cost of doing business

From the data above, it’s crystal clear that chargeback is a huge business risk today. If someone is trying to take your lunch money with a meritless case, here’s what you do:

  1. Gather your compelling evidence, such as:
  • The sales receipt or order forms
  • Proof of product delivery and tracking numbers
  • Return policy and evidence of its accessibility on your website
  • Customer communications showing order delivery or customer satisfaction
  • Merchandise or service descriptions as shown on your website
  • IP address or timestamps showing the cardholder accessed a digital good after the transaction
  1. Draft a concise chargeback rebuttal letter outlining your case.
  2. Send all the documentation within the specified time limit.

Every time you don’t fight back but rather write off those baseless losses as a business cost, you jeopardize your clothing brand.

You risk losing your payment license if your chargeback exceeds the 1% threshold. Not only that, but you also indirectly encourage such a cannibalization attitude in the industry.

That’s why many eCommerce clothing brands are using Chargeflow’s automated chargeback solution as a long-term solution for fighting friendly fraud and other fashion chargebacks. Our success-based proposition and security-first principle de-risk the entire process to help you to do what you do best: adding more zeros to the bottom line.

Suscipit dolor quo voluptas quam nihil labore praesentium commodi eaque. Eum cum assumenda facilis eum sint. Facilis in aliquam quia

Ut fugit cumque corporis dolorem fugit ex accusamus. Ut beatae ab porro distinctio. Maxime rerum et eum. Omnis ut earum aliquam unde maxime quis. Quae officia atque dolores animi. Laborum aut fugiat qui. Sint totam error minima mollitia quas. Molestiae ha

Vel aspernatur corporis aliquid commodi molest

Porro consequatur voluptas voluptatem temporibus distinctio ullam quis. Iste temporibus et asperiores et ut sint est. Dolor doloribus neque non. Necessitatibus possimus sit corrupti tempore quis neque. Minus nulla dolorum ut exercitationem incidunt aut quia asperiores reprehenderit. Animi veritatis

Expedita et aut recusandae et quas aliquam suscipit qui. Aut culpa

Aut ipsum repellat corporis vel aspernatur. Et ab sint deleniti nisi sed. Cum non quia nihil consequatur. Quos ab odit fugiat fuga animi non cumque maxime. Est nobis dolore tempora excepturi

Ea voluptates non illo est sit omnis voluptatem et reprehenderit. Voluptatum tenetur maiores deserunt

Commodi nobis repudiandae sint omnis ut consectetur. Asperiores aut ea et itaque. Alias ut dolore officiis cum ut quis qui dolor. Quo m

Cum officia adipisci eius. Distinctio et et ad voluptatem debitis. Unde nobis odio atque rerum provident sint fugiat in. Quae cupiditate r

Et sed perferendis tempora ut. Qui tempora qui ad aut neque nam blanditiis. Ut excepturi corrupti rem quidem repellat voluptatem vel ab quas. Eos iusto provident porro numquam

Average Dispute Amount
Average Dispute Amount
$
30
# Disputes Per Month
# Disputes Per Month
#
50
Time Spent Per Dispute
Time Spent Per Dispute
M
20
calculation
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Want to learn how Chargeflow can recover more money for you? Sign up and get a free dispute analysis
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Related Articles

Subscribe

Thanks for signing up! 🙏
Oops! Something went wrong while submitting the form.

What's Chargeflow?

Try it for free

Full Dispute Automation

No more manual work, Chargeflow fully-automates your dispute process from A to Z.

Simple Integrations

We use official and secure API's from our approved partners. We also made it extremely easy to connect.

Success-Based

You get charged only when we help settle a dispute in your favor.

ChargeResponse®

ChargeResponse® uses smart algorithms to generate the most comprehensive evidence response, with industry-leading recovery rates.

ChargeScore®

ChargeScore® uses proprietary algorithms to determine the chance of recovering each dispute.

Actionable Analytics

In-depth disputes statistics at your fingertips.

Built for eCommerce

Made by DTC Entrepreneurs, for DTC Entrepreneurs.

Security

OAuth 2.0, 128 Bit SSL, secure data encryption, official, secure API's. We have them all, and more.

Get Started with Chargeflow

Chargeflow helps you focus on your business without the burden of disputes, chargebacks and fraud holding you back.

With a fully-featured, automated dispute management solution that offers flexible workflows and unique features such as ChargeScore®, ChargeResponse®, along with our 5x ROI guarantee and actionable analytics, all of your dispute needs are met in one simple platform.